Business Environment Analysis: BAE Systems in the Portuguese Market

This report examines BAE Systems' planned expansion into the Portuguese market, focusing on the external and internal factors influencing its success. It begins with an introduction to the business environment and the chosen organization, BAE Systems, a multinational defense, security, and aerospace company. The report then provides information on BAE Systems, detailing its operations, financial position, and legal structure. A key section involves a thorough discussion of the Portuguese business environment, covering economic, cultural, political, and legal factors. The report employs PESTLE analysis and Porter's Five Forces model to assess the business environment. The PESTLE analysis evaluates political, economic, social, technological, legal, and environmental factors. Porter's Five Forces model assesses the intensity of rivalry, the threat of new entrants, the bargaining power of suppliers and buyers, and the threat of substitute products. The report concludes with a discussion of data and charts to support the business in Portugal, underscoring the importance of international expansion for economic growth. The report's comprehensive approach aims to provide a strategic overview of BAE Systems' potential in the Portuguese market, offering valuable insights into the company's expansion strategies and the challenges it might face.

Business environment

Table of Contents
INTRODUCTION...........................................................................................................................3
Information of selected business organisation............................................................................3
Discussion of allocated business environment............................................................................4
Application of an appropriate analytical approach.....................................................................6
Data and charts to support business in Portugal ........................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES ..........................................................................................................................11

INTRODUCTION
Business environment refers to external and internal forces and factors which affects the
organisations ability to build and maintain long term successful customer relationship. While
business organisations are the enterprises where business operations are being carried out for
providing goods and services to meet the requirements of customer. It is very essential for the
organisations to focus on environment in which they are operating to control the risk of failure of
business. The chosen company in the report is BAE systems which is a British multinational
defence, security and aerospace company headquartered in London, UK. In this project BAE
systems will be going to expand its operations in Portugal in satisfying customer needs. Hence ,
various types of analytical approaches will be discussed in this project such as; PESTLE
analysis, segmentation and other tool which helps in understanding the impact of business
environment on respective organisation.
Information of selected business organisation
Business is a sphere which works for organising, planning, distributing goods and
services in market to establish its products to grab market opportunities in existing and new
market by exploring current and future trends. The focus of business organisation to establish its
market share is to earn profit and market share.

In this report organisation is BAE systems that is multinational organisation which works
on defence, security and aerospace manufacturing. Organisations headquarter is in London, UK
that works worldwide. As report mentioned that BAE plan to expand its market share in new
country that is Portugal as they find new opportunities to expand its market share in that country.
This organisation works on to provide solutions by giving competitive edge in air, marine, land
and cyber spheres. It works on support local partners by giving knowledge, skills and techno
services in economic development. It employ manpower of 82300 in over 40 countries
approximately. There vision is to be prime in international defence, space and security. There
mission is to give advantages to help their customer's that really matters for them. Their business
in electronic warfare systems to gather intelligence to armour and vehicles at world wide. It
works on to deliver solutions to protect clients in intelligence era. The financial position of BAE
is sound enough and it expand in different markets. It is the six largest suppliers in US in defence
department. BAE systems work in aircraft, armours and defence electronics in world wide it is
pioneers in triple expansion line. It international plan is that it expand its market share in
Portugal by launching new products and services in new market. Products are offered by BAE is
quite expensive and qualitative that brings attention towards it. BAE systems have its own legal
structure in which it has system of hierarchy in power and duties are distributed in organisation.
It is third largest defence group in world and has 100000 employees approximate in worldwide.
The structure of team and its members consist of a flat structure which has capability with
specialization and management of central, with chief counsel in main areas of businesses.
Legal structure of BAE
BAE's legal system work on Cab rank model in which lawyers are come in first come
first served model. This model also works on other markets such as Asia and middle east. Its
structure works on growing potentiality of activities and amends its resource development and
brings harmony. The company managed through three chief reporting officer that report to chief
executive officer that supports and assist their works and activities in BSE. The international
future expansion plans includes it develops its capabilities in air, marine and land with space
worldwide with range of skills. It plans to manufacture designs, military aeroplanes and ships
and space systems and radar and other range of products and it is on path of launching in new
markets with new products in artificial intelligence with intelligent connections by innovative

solution. It plans to expand in world wide as in Portugal, Saudi Arabia and many other
countries to expand its market share by evaluating its growth share and future capabilities.
Discussion of allocated business environment
Organisations are operating under competitive and dynamic environment which is
consequently changing because of the internal and external business forces of business
environment. Strategies should be adopted in such a manner that which benefits the organisation
to sustain in complex environment. BAE systems are going to expand its operations in Portugal
to satisfy the requirements of the people in Portuguese. Respective company deals in various
aircraft's, ship building and defence work. Evaluating and scanning the external environment in
terms of aerospace and defence is understanding the changes in competitive environment. The
analysis of business environment in Portugal terms of economy, culture, political, legal and
financial systems are as follows-
Economy- Economical factors include inflation rate, interest rate, GDP, unemployment rates etc.
In environment of political and social stability Portugal has undergone significant changes as
change in structural reforms aimed to liberalisation of economy. These reforms included fiscal
policy and social security which aims in country's development. In short Portugal has responded
to development challenges and achieved improved image in international expansion.
Cultural- The culture of Portugal is the result of the complex flow of different civilizations
during the time. It consist of people values and beliefs related to particular products or service.
Hence the social beliefs in the Portugal country are sound and stable allows companies to expand
its operations as the people will readily accept the changes and the product and service will be
highly acceptable. This will allow BAE systems such as aerospace and defence companies to
widen their operations.
Political- Political factors are important in mixed economy as it affects the working of
organisational significantly. It consist of various ideologies of the government which affects the
operation of the industries. This factor of business environment greatly affects the working of
business operations.
Legal- In legal environment of business when law or the policy changes in particular country it
affects the operations of many industries. This factor of business environment greatly affects
performance as industries have to see various laws such as health and safety law, environmental
laws before start up of operations.

Application of an appropriate analytical approach
It is very essential for every company to properly make use of analytical model to expand
its operations in operation's in another country. It is crucial for BAE systems to examine each
and every features so that business operations are carried in effective manner. Approach used by
the company is PESTLE analysis.
PEST analysis
 Political factors- It is very essential for BAE systems to analyse the political situations of
the country in order to expand its operations. Portugal country have much stable
government as because of the stability of Continental borders which are well defined and
stable makes the BAE system expand its operations and enjoy the privilege of defence
services. They also have efficient and transparent legal framework which highly allows
company to start and expand its business operations.
 Economic factors- The macro environment factors like Inflation rate, interest rate ,
foreign exchange rate are present in economy and is having a strong impact on the
business activities of BAE systems. Economic environment consist of various business
activities like GDP rate, interest rate and inflation rate. Economy is expanding at a
healthy but at a weaker pace. There is stability in the exchange rate and a decline in
inflation and falling interest rates. Therefore for BAE systems it is necessary to provide
various shipbuilding and defence security to the people and make the people safe and
secure. Hence making the economy of Portugal more sound and stable. As well as cut in
inflation and interest rate increase the demand of airline which in turns increases demand
for aircraft.
 Social environment- Social and cultural environment reflects the needs and requirements
of individuals according to their values and ethics. The socio-cultural environment
consist of attitudes, beliefs, desires, needs and wants, education and customs of the
society at a given point of time. Social beliefs in the Portugal are sound and positively

impacts BAE systems to achieve its goals and further expand its operations. As Because
of increasing number of private persons travelling by air it creates high demand for
aircraft production in Portugal and allows BAE systems to expand its operations.
 Technological environment- Technological environment is essential for organisation as
it influence the type of conversion process that it may occurs for its purpose. There is
high requirement of technology for defence and aerospace companies because of the
invention of the atomic bomb for defence purpose as these technological opportunities
are resulting in incremental changes which are readily acceptable by people of
Portuguese. Technological up gradation in Portugal country is extremely high and
allowing respective company to experiment long in the market which would have lead to
benefit of expanding its operations.
With the help of Porters five forces model it made the respective company analysis its
competitive strategy more efficient. There are different number of factors influencing the
operations of BAE systems.
Intensity of rivalry-
There are numerous factors which can increase rivalry in business and large number of
competitors is the basic reason. But when there is slow market growth rate led the business to
compete for a larger share. For example when BAE systems owns heavy machinery and the loss
caused due to the exit intensify the competition. While heavily increasing rivalry in growing
market becomes highly saturated and many players quit from the sector. Intensity of rivalry in
BAE systems is moderate, with its up-graduation features it can overcome the competition.
Threat of competition
In this competitive environment there is always threat of new entrants. The existing
organisations can set the prices for their product and services at a lower cost to make the
company less attractive in front of competitors. While comparing to the BAE Systems the main
competitors are Boeing and Airbus for aircraft production. With their efficient technology and
service they place a heavy competition against each other while the threat of new entrants is
moderate. There is high level of competition of BAE Systems in Portugal and should undertake
all factors before expanding its operations.
Bargaining power of suppliers

Components of the aerospace and defence products has many suppliers . Suppliers are in
the dominant position decrease their margins due to wide availability of products. BAE systems
can tackle the bargaining power of suppliers by building efficient supply chain with various
suppliers. They can also experiment product with new designs using different materials so that if
the price of one raw material goes up the company can shift to another.
Bargaining power of Buyers
In general the demand of the buyers in portugal are very high. This puts pressure on the
BAE systems to provide efficient services in the long run. The smaller and the more powerful
customers are of BAE systems which increases their bargaining power. Respective company can
tackle the bargaining power of customers by rapidly innovating its products which can limit the
bargaining power. New products will also reduce the movement of customers to its competitors.
Bargaining power of buyers are high in respective industry.
Threat of substitute product
When this respective industry has powerful suppliers there are large number of
substitutes. Hence contracts take long period of time to complete and it becomes difficult for the
Portugal government to switch to suppliers and to their substitute products. In case of respective
company they are looking to in-source if the defence contractors and suppliers that are unable
to meet the requirements.
Data and charts to support business in Portugal
International expansion gives advantages to both the organisation as well the country in
improving their economical state. It generates money as well with the use of efficient technology
it helps country to serve the purpose and benefits customers at large. In context with the global
environment it creates impact on the economy for carrying business operations. Therefore there
are various opportunities available for expansion of industry in Portugal. Therefore, before
launching business in Portugal, it is necessary for BAE systems to analyse the economical
condition of this nation.

INTERPRETATION
From the above graph it is interpreted that consecutively from last five years there is high
rate of economical condition of Portugal. Along with this there is increase in GDP which will
allow BAE system to expand its operations but in addition to this policy rate, interest rate and
unemployment rates are continuously decreasing which have to managed for smooth functioning
of country as well as organisations. The most attractive feature which attracts the mind of
organisations to expand internationally in Portugal is its very high production rate it was 0.5% in
2013 but now has raised to around 3.9% of total economy. As per statistical analysis, it has
estimated that economy of Portugal will grow to near about 1.9% in 2019 (Portugal Economic
Outlook, 2018). Also from the above points it is clear that it will be beneficial for BAE systems
to expand its business operations in Portugal which will help in raising profits and productivity.
CONCLUSION
From the above graph it has been concluded that business environment directly impacts
the working of business operations globally or internationally. It greatly affects the decision
making process of formulation of plans and strategies to be made in accordance with the changes
in business environment. Hence before expansion of business on a global level, company needs
to conduct PESTLE analysis of the country in identifying the issues and advantages of operating
internationally. Porter five forces model for BAE systems was analysed to determine the
attractiveness of the industry. In addition to this by analysing economical condition of Portugal
country where a company wants to expand business is also necessary to analyse. This would
help in generating high profitability and level of income.

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Online
Portugal Economic Outlook. 2018. [Online] Available Through:<https://www.focus-
economics.com/countries/portugal>